P5-16

PRESENT VALUE OF A SINGLE AMOUNT-A

Future Value
$28,500
Annual rate of interest
11%
Number of Years
3
Present Value
###

b. Alternatives A and B are both

worth greater than $20,000 in
term of the present value

c. The best alternatives is B,

because the present value of B
larger than either A or C and is
also greater than $20,000 offer

PRESENT VALUE OF A SINGLE AMOUNT-B

Future Value
$54,000
Annual rate of Interest
11%
Number of Years
9
Present Value
###
PRESENT VALUE OF A SINGLE AMOUNT-C
Future Value
$160,000
Annual rate of Interest
11%
Number of Years
20
Present Value
###

P5-49
ANNUAL PAYMENT AMOUNT TO REPAY A LOAN
Present Value
$10,000
Annual rate of Interest
13%
Number of Years
3
Annual Loan Payment
($4,235.22)

Payments
End of Year
1
2
3

Beginning of
year
principal
$10,000
7,064.78
3,747.98

Loan
payment

Interest

$4,235.22
$4,235.22
$4,235.22

$1,300
918.42
487.24

LOAN AMORTIZATION SCHEDULE

$10,000
Loan principal
13%
Annual Rate of Interest
3
Number of Years
Annual Annuity Payments
Year
0
1
2
3

Total

To Interest To Principal

($4,235.22) ($1,300) ($2,935.22)

($4,235.22) ($918.42) ($3,316.80)
($4,235.22) ($487.24) ($3,747.98)

P5-16

. Alternatives A and B are both

worth greater than $20,000 in
term of the present value

c. The best alternatives is B,

ecause the present value of B is
arger than either A or C and is
lso greater than $20,000 offer

Payments
End of
Year
principal
$2,935.22 $7,064.78
$3,316.80 $3,747.98
$3,747.98
$0.00
Principal

Year End
Principal
$10,000
$2,936.22
$3,318.80
$0.00